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TRUCKING INDUSTRY * USA
* ANALYSIS - If YRC fails, what happens to US truck sector?
Chicago,ILL,USA -Reuters News, by Nick Carey & Matthew Lewis -July 6, 2009: -- The fortunes of a particular corner of the U.S. trucking industry in the next year are as tied to whether one company, YRC Worldwide Inc, survives as they are to a recovery in the recession-bound U.S. economy... If YRC fails it could provide competitors with just the reduction in industry capacity they need to jack up pricing for the first time since late 2006... During the recent economic boom, YRC was profitable and seemingly riding high after it acquired rival Roadway Corp in 2003 for $966 million followed by USF Corp in 2005 for $1.47 billion, making it the undisputed No. 1 in the U.S. LTL market. But those acquisitions have come back to haunt YRC... As the U.S. economy began to sour, YRC did not do enough to integrate its national network, leaving it with too many facilities, a high debt load, too many workers and high fixed costs, analysts said... When the recession hit, YRC took heed and started cutting facilities and workers. But since the market crisis that followed the collapse of Lehman Brothers last September, the company has lurched from crisis to crisis... So far this year YRC has secured seven amendments to its $950 million credit facility from creditors, persuaded the Central States multi-employer pension fund to take property instead of cash for pension payments, plus convinced its Teamster union-represented workers to take a 10 percent pay cut in return for a 15 percent stake in the company... Should YRC fail, the market should be able to absorb its business given the spare trucking capacity caused by the bad economy. LTL companies have idled trucks and drivers that could be brought back into the market quickly to deal with the extra freight... YRC's operations would likely not disappear completely either, as there could be a restructuring in bankruptcy and parts of the company could be saved or sold off... Baird said this would boost the rest of the LTL sector, especially Con-way Inc and Old Dominion Freight Line Inc. FedEx Corp and United Parcel Service Inc, which both have LTL units, could also benefit... Analysts say Arkansas Best Corp would also get a boost, though as a unionized operator it could suffer from YRC's withdrawal from multi-employer pension funds as it would have to assume more of those funds' costs... YRC's competitors would also be able to raise prices as supply would be more in line with demand... Dahlman's Seidl said that according to his sources within the industry, the expectation is that large shippers would see "upper single-digit" rate increases while smaller shippers would see their rates rise "well into double digits"... (Photo from: hankstruckpictures: YRC Argosy taken along I-84 near Boise, ID)
Labels: trucking industry news USA
posted by Unknown @ 3:34 AM
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